2015 (12) TMI 1197 - HC - VAT and Sales Tax

Liability to tax - Taxability under DVAT or CST Act - no notice of reassessment under Section 32 of the DVAT Act was issued - Whether a transaction can be taxed twice, once under the Delhi VAT Act as intra-State sale in the State of Delhi and again as interstate sale under the CST Act - Held that - It requires the Assessee to appear before the VATO on 19th September 2011 for recording his statement, produce his book of accounts and evidence being relied upon by him. It requires him to produce a host of documents including the record of interstate sales and transfer of goods along with statutory declaration form, supporting documents regarding export sales... , GR/RRs, Form-4 and Form-7 and copy of returns and balance sheet with audit report. A second document in this compilation is a notice dated 19th October 2011 issued by the VATO to the Assessee noting that the Assessee had appeared and sought time from the VATO till 23rd September 2011 for filing the documents and given the Assessee a final opportunity of submitting the requisite documents by 31st October 2011. In light of the documents that have been emerged during the course of the present hearing and which the Appellant claims not to have received earlier, and since these documents have a vital bearing on the validity of the assessments initially made and the reassessment made subsequently, the Court considered it appropriate to remand the matter to the VATO for a de novo re-assessment proceeding after giving the Appellant a proper opportunity to explain the materials now placed on record. - if it is able to be established by the Department that an audit did take place in accordance with Section 58 of the DVAT Act and the audit report showed that the Appellant was not entitled to avail of the benefit of the C-Forms and H-Forms produced by him in support of the claim of interstate and export sales, that would go to the very root of the matter and render the initial assessment made under Section 9(2) of the CST Act unsustainable in law. Appellant has been given all the documents, which the counsel for the Respondent assures form part of the record, there should be no difficulty in the VATO proceeding further in the matter on the basis of the said documents. Nevertheless, to allay the concerns expressed by counsel for the Appellant, the Court directs that the VATO will ascertain whether the documents that have been produced before this Court do form part of the record of the assessment and re-assessment. The VATO will give the Assessee an inspection of the original files of the Department containing the said documents. - Impugned order is set aside - matter remanded back.

Issues Involved:
1. Quantum of tax.
2. Imposition of penalty.
3. Validity of reassessment without issuing notice under Section 32 of the DVAT Act.
4. Double taxation under DVAT Act and CST Act.
5. Validity of audit proceedings under Section 58 of the DVAT Act.
6. Limitation period for reopening assessment.

Detailed Analysis:

Quantum of Tax:
The Petitioner Assessee, a registered dealer under the DVAT Act, undertook both local and inter-state sales during the four quarters of AY 2008-09. The dealer furnished C-Forms and H-Forms for inter-state and export sales respectively, but was unable to furnish C-Forms for sales worth Rs. 1,20,900. Consequently, a default assessment order was passed by the VATO under Section 9(2) of the CST Act, directing the Assessee to pay tax amounting to Rs. 12,695. The Assessee remitted the demanded tax.

Imposition of Penalty:
The VATO issued notices stating that the Assessee had filed incomplete or incorrect returns. Upon enquiries with certain transporters, it was found that the goods receipts (GRs) could not be verified. The VATO thus treated the central sales as local sales, taxable at 12.5%, and imposed differential tax along with interest and penalty under Section 33 read with Section 86(10) of the DVAT Act. The OHA confirmed the demand of tax, interest, and penalty.

Validity of Reassessment Without Issuing Notice Under Section 32 of the DVAT Act:
The Petitioner argued that reassessment could not be made without issuing a notice of reassessment under Section 32 of the DVAT Act. The Court noted that the initial assessment under Section 9(2) of the CST Act had attained finality and was not revised by a superior authority.

Double Taxation Under DVAT Act and CST Act:
The Petitioner contended that the same transaction should not be taxed twice, once under the DVAT Act and again under the CST Act. The Court acknowledged the principle that until assessments under the CST Act are set aside, it is not possible to subject the same transaction to VAT.

Validity of Audit Proceedings Under Section 58 of the DVAT Act:
The Tribunal dismissed the appeals based on the audit team's information. The Petitioner argued that the audit evidence was gathered without giving them an opportunity to counter it. The Court examined whether the audit took place in accordance with Section 58 of the DVAT Act and whether the hand-written statement by the Assessee's proprietor was given voluntarily.

Limitation Period for Reopening Assessment:
The Petitioner argued that the limitation period for reopening the assessment for AY 2008-09 would expire on 31st March 2015. The Court clarified that the appeals are a continuation of the reassessment proceedings initiated by the VATO's notice on 1st December 2011/13th February 2012, which was within the limitation period.

Conclusion:
The Court found that the documents produced during the hearing had a vital bearing on the validity of the assessments and reassessments. It remanded the matter to the VATO for a de novo reassessment proceeding, giving the Assessee a proper opportunity to explain the materials now placed on record. The Court directed the VATO to proceed expeditiously and complete the reassessment within six months. The impugned orders of the Tribunal, VATO, and OHA were set aside, and the appeals were disposed of accordingly.

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